Can I afford to buy a home? Can I afford not too?

By: Jennifer Weeks, Certified Divorce Financial Analyst & CFP

When I ask clients ‘What is the best investment you have ever made?’, home owners always answer, ‘my home’. Depending on where and when you bought into the housing market, real estate in Vancouver has doubled, tripled and even quadrupled over the last 12 years.

Real estate is more than just an investment – it is a home for our family. As the old adage says ‘home is where the heart is’. It holds memories, creates a place for families to gather, a place of comfort, familiarity and community. All this brings security and stability to our world. During divorce this loss weighs heavy on families.

Family law equalizes assets and cash flow between separating couples. Half the house, half the cash flow. During the divorce process, the most pressing questions for many are “Can I afford to buy a home?” and “Can I keep the family home?”

Most families cannot afford to own two homes in Vancouver following a divorce. To buy out your spouse’s portion of the house is an expensive proposition. With the average home in Metro Vancouver valued at approximately $900,000, that would be $450,000 or additional monthly mortgage payments of over $2000.

So what are the options when half of the proceeds are not enough to buy an alternative home and the cost of moving is very expensive? There is no easy answer, but here are some important considerations:

Do you and your spouse both agree that keeping the family home is important to your children’s well being?
What are you willing to give up to provide your children with a home in your community and are you aware of the consequences?
Have you considered all the costs of home ownership?
Increasing costs of property tax.
Maintenance costs of owning a home. At least $500 per month should be budgeted to maintain the home.
Insurance costs protect homeowners from unforeseeable damages.
Interest rate risk – implications of increase in monthly payments if the mortgage interest rates increase.
The housing market:
It may seem like real estate in Vancouver only goes up, but like any asset class, real estate is also cyclical and the market will fluctuate throughout our lifetime.
Long term consequences
Are you giving up your own personal financial security to keep the home?
Is all your income going towards paying your mortgage and the expenses of your home.
Are you having to spend the equity in your home to pay your monthly expenses?
Are you able to save for retirement, emergencies and your children’s education?
Your circumstances will change over time and there are many other living options to consider like:

Moving to a more affordable neighbourhood
Purchasing a smaller home
Renting
Buying a new home with rental revenue to supplement the costs
Through Collaborative Divorce you may be able to find more creative solutions based on what is best for your family. Working with divorce financial specialists, divorce coaches, and family lawyers you can identify what is realistic, fair, and will work for your family.

Learn more about Collaborative Divorce and contact one of our team members today!